Zillow’s long national nightmare may be ending sooner than we thought.
The Seattle company shocked the real estate world in November when it announced a wind down of its instant home buying operations, with CEO Rich Barton copping to the fact that the business’s home price forecasting model was too volatile.
But for the first quarter of 2022, Zillow’s fortunes turned, and the company made $16 million in net income. Zillow also raked in $4.3 billion, with $3.7 billion of that emanating from Zillow Offers, the soon to die iBuying division that is generating money by Zillow selling its inventory.
This compares to $1.2 billion in revenue and $52 million net income in quarter one 2021 – an admittedly almost useless comparison given that Zillow was in the throes of ramping up iBuying at that point.
Zillow’s public numbers also gave confirmation that the company mostly unloaded the homes purchased under iBuying.
Just “approximately 100 homes are currently not yet under contract” to be sold, according to a letter released to shareholders Thursday.
“We expect the remaining inventory to be substantially complete in Q2,” the letter noted, with realized or expected losses of $300 million at the end of quarter one.
Barton touted on Thursday’s call the “rapid and successful wind down” of iBuying, creating a “nimble balance sheet” from Zillow.
If Zillow can safely bury iBuying, what revenue sources will guide the widely popular listings website going forward?
Barton used much of his prepared remarks to discuss 3-D home touring, a feature that dovetails with Zillow’s $500 million buy of home touring scheduler ShowingTime last year.
And the CEO mentioned the development of Zillow’s “Super App” that would facilitate this home touring, and also better facilitate partnerships with real estate agents, who tend to have a love-hate relationship with the listing titan.
When Zillow Offers shut down, the company’s largest revenue source will be Premier Agent. Under Premier Agent, real estate agents pay monthly fees in order to pop up when a consumer searches for a home on Zillow.
Premier Agent, which is part of the company’s “Internet, marketing, and technology” segment generated $363 million of the segment’s $490 million in revenue.
Income for Premier Agent is not broken out on Zillow’s quarterly report. But the overall internet, marketing, and technology segment generated a robust $108 million in operating income.
Analysts on the call focused many of their questions around Premier Agent, particularly the news of a Zillow pilot program in Raleigh, North Carolina and Denver.
Under the program, agents would no longer pay monthly fees to Zillow, but rather on a contingency basis after making a sale. The pilot will also kick off hundreds of agents not meeting Zillow goals.
On the call, Barton framed the experiment as simply “R&D” and an effort to see if Zillow can “lower the participation” and “enhance our partner network.”
“Unfortunately,” Barton said of the program, “It broke into the public,” which, the CEO noted, is the consequence of working with agent and broker partnerships.